December 4, 2008

Dow Jones Financial News Online

Data giants face shrinking bank revenues

The financial data business faces an unfavorable outlook in the next two years following a stagnation in growth this year, leaving the door open to new companies to challenge the duopoly of Thomson Reuters and Bloomberg, according to new research.

The global spend on financial information and analysis for this year has been forecasted to be $23.01b, according to Burton-Taylor International Consulting, compared to a total for last year of $22.99b, an increase of only 0.09% year on year.

Revenues from the largest financial data segment, fixed income/foreign exchange sales and trading, will be flat this year at $6.47b, where "uncertainty in the credit markets kept the segment from showing positive movement," according to Burton-Taylor.

Hardest hit has been investment banking, however, where "bankruptcies and restructuring have reduced the size by almost %40."

Burton-Taylor argues things are going to get even worse next year.

It wrote a report yesterday: "The full impact of structural and regulatory changes won't be felt until 2009 and 2010 when vendors see a tangible hit on desktops and feel a quantifiable hit on contracted revenues."

Douglas B Taylor, managing partner of Burton-Taylor, said he believed there will be opportunities next year although the outlook is not favorable.

He said: "The 'new world' of investment banking will be an interesting evolution in 2009. Deals will continue to be done, and the need for quality decision making tools will continue to exist. The uncertainty will be around the changes in information that might be required and the workflows of the participants as their roles evolve."

Taylor said he thought boutiques will emerge, prompting new demand for information services, but investment banking will determine the success, or otherwise, of the data vendors next year.

He said: "The function of investment banking, within the commercial banking sector, and more specifically the number of participants within the sector, will ultimately define the financial impact this segment has on global vendor revenue."

Burton-Taylor said it would publish its 2009 forecast in the first quarter of next year, adding it expects "single digit growth in the industry next year."

The latest research suggests Thomson Reuters will consolidate its leading position next year, with 34% of the market, while Bloomberg will show minimal revenue growth in 2008, driving its market share up slightly to 24%.

Taylor believes there is an opportunity for another firm to move up to challenge the two largest data vendors, however. He said: "The wait continues to see which other company will show the commitment and expertise to step up and complete the new 'Big3' ."

by Luke Jeffs